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HSBC and StanChart step up banking in Vietnam

Deals

HSBC Holdings and Standard Chartered Plc won approval to be the first foreign banks to open wholly-owned units in Vietnam, as the communist-run state opens up more to foreign investment.

HSBC, Europe’s largest bank which first arrived in Vietnam in 1870, said in a statement on Tuesday it would headquarter its Vietnam-based bank in Ho Chi Minh City, the country’s commercial centre. “We aim to start operating through our new local entity as early as possible,” HSBC’s local CEO Thomas Tobin said, adding HSBC hoped to be the first foreign bank to operate a fully-owned local entity in the fast-growing Vietnamese banking sector.

Separately, the State Bank of Vietnam said it also licensed Standard Chartered to open a wholly-owned bank based in Hanoi and with a capital base of $61 million. “This is a clear sign to show Vietnam’s strong commitment toward WTO,” the central bank said in a statement. Vietnam is opening up more to foreign banks as part of its commitments to the World Trade Organization, which it joined last year.

HSBC and Standard Chartered now have 12 months to start operations in Vietnam, where only 10% of the 86.5 million population have bank accounts. State-run Agribank, Vietnam’s biggest enterprise, runs half of the 4,000 bank branches nationwide. HSBC, Standard Chartered, now operating branches in Hanoi and Ho Chi Minh City, are among nearly 40 foreign banks in the country, all holding between them 14% of market lending.

HSBC Bank Vietnam Ltd would have a registered capital of $182 million, the State Bank of Vietnam said. The central bank has said it aimed to keep the country’s credit growth this year at 30% after a surge of 54% in 2007 to control double-digit inflation.

 
COMPETITION

HSBC and Standard Chartered would compete with four Vietnamese state-run banks, the country’s top lenders, while more than half of the 37 partly private banks now in operation are small entities, with total assets of less than $1 billion each. “Local incorporation will allow us to have a broader distribution network to reach existing and new customers,” HSBC’s Tobin said.

Standard Chartered plans to open up to 30 new branches in Vietnam over the next three to four years, Ray Ferguson, Standard Chartered Bank’s Regional CEO Southeast Asia said in March after the bank won initial approval from the Vietnamese government. Besides six joint venture banks, more than 20 financial leasing companies and nearly 1,000 small-sized people’s credit funds also operate in Vietnam.

More competition would come from foreign banks, ANZ among them, with a long presence in Vietnam which have been seeking permission to open wholly-owned banks. Apart from banking activities, HSBC and Standard Chartered have bought stakes in local banks.

Hanoi-based Techcombank, Vietnam’s seventh-largest lender by assets, finalised a share sale to HSBC last week for around $77 million, increasing HSBC’s stake to 20%, the ceiling for foreign investors in a domestic bank. HSBC has also acquired 10% of stake in Bao Viet Holdings, Vietnam’s largest insurer. Standard Chartered owns 15% of Asia Commercial Bank. (Reuters)

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